Significant Accounting Policies | 2. Significant Accounting Policies Use of Estimates Cash and Cash Equivalents Allowances for Doubtful Accounts Inventories first-in, first-out During the fourth quarter of 2018, we determined that it was preferable to change our accounting policy from last-in, first-out Property, Plant and Equipment Buildings and leasehold improvements 15 to 40 years Machinery and equipment 3 to 15 years Software 3 to 7 years Long-lived Assets During 2017, we recorded an impairment of $5.1 million related to a long lived asset to be disposed of in selling, general and administrative expenses. Goodwill and Indefinite-lived Intangible Assets We evaluate the recoverability of goodwill using a weighting of the income (80%) and market (20%) approaches. For the income approach, we use a discounted cash flow model, estimating the future cash flows of the reporting units to which the goodwill relates, and then discounting the future cash flows at a market-participant-derived discount rate. In determining the estimated future cash flows, we consider current and projected future levels of income based on management’s plans for that business; business trends, prospects and market and economic conditions; and market-participant considerations. Furthermore, our projection for the U.S. home products market is inherently subject to a number of uncertain factors, such as employment, home prices, credit availability, new home starts and the rate of home foreclosures. For the market approach, we apply market multiples for peer groups to the current operating results of the reporting units to determine each reporting unit’s fair value. The Company’s reporting units are operating segments, or one level below operating segments when appropriate. When the estimated fair value of a reporting unit is less than its carrying value, we measure and recognize the amount of the goodwill impairment loss based on that difference. Purchased intangible assets other than goodwill are amortized over their useful lives unless those lives are determined to be indefinite. The determination of the useful life of an intangible asset other than goodwill is based on factors including historical tradename performance with respect to consumer name recognition, geographic market presence, market share, and plans for ongoing tradename support and promotion. Certain of our tradenames have been assigned an indefinite life as we currently anticipate that these tradenames will contribute cash flows to the Company indefinitely. Indefinite-lived intangible assets are not amortized, but are evaluated at least annually to determine whether the indefinite useful life is appropriate. We measure the fair value of identifiable intangible assets upon acquisition and we review for impairment annually in the fourth quarter, and whenever market or business events indicate there may be a potential impairment of that intangible asset. Impairment losses are recorded to the extent that the carrying value of the indefinite-lived intangible asset exceeds its fair value. We measure fair value using the standard relief-from-royalty approach which estimates the present value of royalty income that could be hypothetically earned by licensing the brand name to a third party over the remaining useful life. The determination of fair value using this technique requires the use of estimates and assumptions related to the projected tradename revenue growth, the assumed royalty rate and the discount rate. We first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. Qualitative factors include changes in volume, customers and the industry. If it is deemed more likely than not that an intangible asset is impaired, we will perform a quantitative impairment test. The events and/or circumstances that could have a potential negative effect on the estimated fair value of our reporting units and indefinite-lived tradenames include: actual new construction and repair and remodel growth rates that fall below our assumptions, actions of key customers, increases in discount rates, continued economic uncertainty, higher levels of unemployment, weak consumer confidence, lower levels of discretionary consumer spending and a decrease in royalty rates. We cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of goodwill and indefinite-lived intangible assets. Investments in Equity Securities non-controlling During the fourth quarter of 2018, our Plumbing segment entered into strategic partnerships with several companies who incorporate emerging technology into plumbing-related products, and at the same time acquired non-controlling shut-off As of December 31, 2018, all of our investments in our strategic partners do not have readily determinable fair values. As of December 31, 2018 and 2017, the carrying value of our investments was $28.7 million and zero, respectively, which is included in other assets within our Consolidated Balance Sheet. There were no impairments or other changes resulting from observable prices changes recorded during the year ended December 31, 2018. Impairments of $7.0 million were recorded within Other income, net within the Consolidated Statements of Income during the year ended December 31, 2017 (see Note 22). Defined Benefit Plans We record amounts relating to these plans based on calculations in accordance with ASC requirements for Compensation – Retirement Benefits, which include various actuarial assumptions, including discount rates, assumed rates of return, compensation increases, turnover rates and health care cost trend rates. We recognize changes in the fair value of pension plan assets and net actuarial gains or losses in excess of 10 percent of the greater of the fair value of pension plan assets or each plan’s projected benefit obligation (the “corridor”) in earnings immediately upon remeasurement, which is at least annually in the fourth quarter of each year. We review our actuarial assumptions on an annual basis and make modifications to the assumptions based on current economic conditions and trends. The discount rate used to measure obligations is based on a spot-rate yield curve on a plan-by-plan Insurance Reserves Litigation Contingencies Income Taxes In accordance with ASC requirements for Income Taxes, we establish deferred tax liabilities or assets for temporary differences between financial and tax reporting bases and subsequently adjust them to reflect changes in tax rates expected to be in effect when the temporary differences reverse. We record a valuation allowance reducing deferred tax assets when it is more likely than not that such assets will not be realized. We record liabilities for uncertain income tax positions based on a two-step The Tax Act made significant changes to the U.S. Internal Revenue Code including a reduction in the corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017, generally providing for an exemption from federal income tax for dividends received from foreign subsidiaries, and imposing a one- time The Tax Act included a provision for Global Intangible Low-Taxed Revenue Recognition Cost of Products Sold Customer Program Costs Selling, General and Administrative Expenses . Advertising costs, which amounted to $243.6 million, $233.2 million and $199.1 million in 2018, 2017 and 2016, respectively, are principally expensed as incurred. Advertising costs paid to customers as pricing rebates include product displays, marketing administration costs, media production costs and point of sale materials. Advertising costs recorded as a reduction to net sales, primarily cooperative advertising, were $72.4 million, $65.6 million and $52.5 million in 2018, 2017 and 2016, respectively. Advertising costs recorded in selling, general and administrative expenses were $171.2 million, $167.6 million and $146.6 million in 2018, 2017 and 2016, respectively. Research and development expenses include product development, product improvement, product engineering and process improvement costs. Research and development expenses, which were $50.3 million, $50.7 million and $53.1 million in 2018, 2017 and 2016, respectively, are expensed as incurred. Stock-based Compensation Earnings Per Share Foreign Currency Translation Derivative Financial Instruments Deferred currency gains/(losses) of $2.2 million, $0.4 million and $(3.5) million (before tax impact) were reclassified into earnings for the year ended December 31, 2018, 2017 and 2016, respectively. Based on foreign exchange rates as of December 31, 2018, we estimate that $3.3 million of net currency derivative gains included in AOCI as of December 31, 2018 will be reclassified to earnings within the next twelve months. Recently Issued Accounting Standards Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, 2014-09 A majority of our sales revenue continues to be recognized when products are shipped from our facilities to our customers. Previously, for certain products, we recognized sales revenue at destination as we determined risks and rewards transferred at that point. We now recognize sales revenue for these customers at the shipping point of the products consistent with the respective contractual terms. See Note 14, “Revenue,” for further information. Leases In February 2016, the FASB issued ASU 2016-02, “right-of-use” 2018-01, 2018-10 2018-11, 2016-02 We plan to adopt the standard in the first quarter of 2019 using the transition method introduced by ASU 2018-11, While we are continuing to finalize our assessment of the impacts of the standard, we have completed our scoping reviews, identified our significant leases by segment and by asset type, and made progress in developing accounting policies upon adoption of the standard. We have implemented an accounting system to support the future state leasing process and input the data from substantially all of our existing leases into the system. We continue to refine our future process design as part of the overall system implementation. Upon adoption, we expect to recognize a lease liability, with an offsetting increase to right-of-use right-of-use Presentation of Net Periodic Pension and Postretirement Cost In March 2017, the FASB issued ASU 2017-07, which 2014-09 Stock Compensation Scope of Modification Accounting In May 2017, the FASB issued ASU 2017-09, non-substantive Clarifying the Definition of a Business In January 2017, the FASB issued ASU 2017-01, Restricted Cash In November 2016, the FASB issued ASU 2016-18, Intra-Entity Transfers of Assets Other Than Inventory In October 2016, the FASB issued ASU 2016-16, Classification of Certain Cash Receipts and Cash Payments In September 2016, the FASB issued ASU 2016-15, Recognition and Measurement of Financial Assets and Financial Liabilities In January 2016, the FASB issued ASU 2016-01, available-for-sale Clarifying Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets In February 2017, the FASB issued ASU 2017-05, non-customer. Improvements to Accounting for Hedging Activities In August 2017, the FASB issued ASU 2017-12 Financial Instruments — Credit Losses In June 2016, the FASB issued ASU 2016-13, off-balance-sheet Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In February 2018, the FASB issued ASU 2018-02, Improvements to Nonemployee Share-Based Payment Accounting In June 2018, the FASB issued ASU 2018-07 Codification Improvements In July 2018, the FASB issued ASU 2018-09 Changes to the Disclosure Requirements for Fair Value Measurement In August 2018, the FASB issued ASU 2018-13 Changes to the Disclosure Requirements for Defined Benefit Plans In August 2018, the FASB issued ASU 2018-14 Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract In August 2018, the FASB issued ASU 2018-15 internal-use |